Electricity is a currency for energy. It provides a convenient and safe means of delivering energy from sources, including heat from burning coal or nuclear fission, falling water, solar or wind power to users. Because electricity cannot easily be stored, generation (supply) and load (demand) must be maintained in a continuous balance. For more than 100 years, vertically integrated electric utilities have maintained this balance by continuously adjusting generation sources to match the total system demand. The utilities generally concluded that generation could be controlled easily, while loads could not.
Utilities face a number of key operational issues, one of which is system regulation. Also known as automatic generation control (AGC), system regulation is a process which measures the difference between supply and demand on a second by second basis, sending signals to specific generation sources every few seconds to maintain the exact balance. Traditionally, utilities have used dedicated generators for this role, selecting machines that have fast response and a range of operation that allows the AGC to be effective. The generators used for AGC provide a service known as regulation service. This service is bought by the ISO.
When purchasing regulation services, the ISO may send regulation services request signals to regulation service providers requesting a change in power to or from the grid in order to maintain the system balance. These signals may come every few seconds. The regulation service provider will react to the request, and send signals back to the ISO showing the change achieved.
The characteristics of the electric grid, including supply, load, transmission and distribution have changed with time, making it increasingly challenging to meet the system regulation demands of the ISO. The following general trends dominate this change:                Generation, which has always been stable, controllable and predictable has been augmented with new renewable generation that is almost the opposite.        The need for regulation services, which has traditionally been provided, using dedicated, fast response generation, has increased significantly, and is expected to continue to grow. At the same time, the portion of the supply with response characteristics that are suitable for providing regulation has been reduced. Almost all new generation is either large thermal which is not suitable for system regulation, or renewable supplies which is also not suitable for system regulation.        